Does Homeowner's Insurance Cover Natural Disasters?

Insurance is needed for any situation where damage or loss is likely to be too expensive to cover out-of-pocket. Standard homeowners' insurance policies cover the most common types of damage, like theft and fire damage, but natural disasters are typically not covered.

When renting or buying a home, consider whether your new home is located in a high-risk area for any of the following natural disasters:

• Floods
• Hurricanes and tornadoes (wind damage)
• Hail
• Earthquakes
• Volcanoes
• Lightning strikes
• Wildfires
• Landslides, mudslides, or mudflows
• Sinkholes

It's wise to review your homeowners' insurance policy so you know what is and isn't covered. This article discusses how natural disasters are covered by homeowners' insurance.

Living in High-Risk Areas

Generally, natural disasters are not covered under a standard home insurance policy. Homeowners living in high-risk areas have the option of purchasing supplemental insurance to cover natural disasters. This specialty insurance will cost more because of the increased risk.

Flood Protection Policies

Standard homeowners' policies only cover flooding caused by plumbing failures, like leaking pipes. They specifically exclude flood damage from heavy rain, rivers or lakes overflowing their banks, coastal surges, or sneak waves.

If you live in an area where floods are frequent, you can purchase a special flood protection policy. In 1968, Congress created the National Flood Insurance Program (NFIP). It allows homeowners in flood-prone areas to buy flood insurance through private insurance companies, backed by the U.S. government.

The cost of NFIP flood insurance coverage is tied to measures your community has taken to reduce the risk of flood damage. To learn more, see National Flood Insurance Program Summary of Coverage [PDF].

Even if you don't live in a flood-prone area, you may want flood coverage. Some lenders require it.

Storm Coverage: Hurricanes and Tornadoes

Standard homeowners' insurance covers wind damage. Damage from tornadoes is typically covered as wind damage. Water damage caused when rain comes through a wind-damaged roof would also be covered.

Most Atlantic and Gulf Coast states are susceptible to hurricane wind damage. Standard policies do not cover the flooding that often follows storm surges from hurricanes. You need to purchase flood insurance and/or special "beach and windstorm" insurance to protect your home.

Hurricanes cause billions of dollars in property damage. If your home is in a high-risk area, be sure to read the fine print on your insurance policy. Many insurance claim disputes hinge on how the terms "wind damage" and "flood damage" are defined by insurers.

Hail Insurance

Hail damage to a roof is covered by most standard home insurance policies. But hail damage can also occur to a home's siding, doors, and windows. In some states, insurance companies can exclude what they consider "cosmetic damage." That is, damage that does not affect the function of the home.

But cosmetic versus functional damage is a gray area. Read your policy and talk to your agent, especially if you live in a hail-prone area like Texas, Illinois, Minnesota, Missouri, and Colorado. Homeowners can purchase separate hail and wind damage insurance.

Earthquake Insurance

The cost of earthquake insurance is determined by several factors:

• Location of the house
• Materials used in its construction
• The way it is constructed
• The integrity of its foundation
• Number of stories or levels
• Home's insured value
• Policyholder's chosen level of coverage

Even if you live in an area not known for seismic (earthquake) activity, you may still have the option of purchasing supplemental earthquake insurance. For example, earthquake insurance is very inexpensive for Missouri homeowners, even though the state sits on the little-known but potentially devastating New Madrid fault line.

Volcano Insurance

Even if you live in Kansas, your homeowners' insurance policy probably covers damage from a volcanic eruption. Standard policies cover damage related to ash, dust, particulate matter, lava flow, and the initial removal of these materials.

Volcano insurance does not cover damage from:

• Landslides
• Shock waves
• Tremors
• Ash deposited later (such as from the wind)

Homeowners living near active volcanoes, including Hawaii and parts of Washington State, may purchase additional coverage specifically for volcanic disasters.

Lightning Strikes

Damage from lightning strikes is covered by most standard homeowners' insurance policies. It will cover damage to property, like wiring, appliances, and electronics. It will cover fires started by lightning. If a tree is struck by lightning and falls on your home, it's covered. What may not be covered is damage from an electrical surge when lightning strikes an area. That's why people buy surge protectors for their electronic devices. If electronics or appliances are damaged, then equipment breakdown coverage can cover replacement.

Wildfires

Wildfires are covered by most insurance policies the same as any other fire. The homeowner is covered for losses caused by both smoke and fire damage.

However, homeowners in California, Oregon, Washington, and Montana are facing a new challenge. Given the increasing devastation of wildfires in Western states, some insurers are no longer offering homeowners' insurance at all.

California has responded to this problem by creating the Fair Access to Insurance Requirements (FAIR) Plan. The FAIR plan provides coverage for homes in high-risk areas. Coverage is more expensive, policy limits are lower, and plans generally don't cover personal property or replacement costs.

Homeowners may find a regular or specialty insurance company that covers their high-risk area. Premiums will be higher and there be specific eligibility requirements.

Landslides, Mudslides, and Mudflows

Landslides and mudslides can occur anywhere but people living in the Appalachian Mountains, the Rocky Mountains, and Pacific coastal states of California, Oregon, Washington, Hawaii, and Alaska are most at risk

Neither a landslide, a mudslide, or a mudflow are covered by standard homeowners' insurance. If you live in a high-risk area, you can purchase a stand-alone policy called a "difference in condition" (DIC) policy. It will pay for your home to be rebuilt to its original condition if it is damaged or destroyed.

DIC policies are more expensive and they aren't sold by most insurance companies. The homeowner may need to find a "surplus-lines" insurer, a firm that sells high-risk policies.

Mudflows are a bit different. They contain more water and may be covered under a separate flood insurance policy.

Sinkholes

Some geographic areas are highly vulnerable to sinkholes. The kind of rock below the surface of the land can naturally dissolve with water. A cavern then grows beneath the surface until one day it breaks through, causing everything above ground to fall into it. They can also form as groundwater is withdrawn and not replaced.

Areas of the country most prone to sinkholes include Florida, Kentucky, Tennessee, Texas, Alabama, Missouri, and Pennsylvania.

Homeowners can purchase two different kinds of specialty insurance coverage for sinkhole damage:

• The most comprehensive is catastrophic ground collapse coverage. This coverage protects you if your home falls into a sinkhole or if the foundation of your home is damaged beyond repair.
• Sinkhole loss coverage is more limited. It covers repairs to the stability of a building and repairs to the foundation, but typically not contents or living expenses. Some policies cover man-made sinkholes but may not cover naturally occurring sinkholes. Be sure to read the policy.

Related Resources

• Insuring Your Home
• What Does a Home Insurance Policy Cover?

Choose You Policy Carefully and Call an Attorney If a Problem Arises

Once a natural disaster hits, your insurance should help fix your home. If you have the right coverage, but the company claims you don't, an attorney can review your policy. Working with a lawyer experienced in "bad faith insurance" claims ensures your insurance company covers what you paid for and that you are not denied help.